Following an unexpected announcement of a first quarter (Q1) loss, shares at United Airlines have swiftly fallen. Shares fell 7% on Monday as the carrier expects losses of $0.6 to $1 per share for Q1, reversing previous guidance of a $0.5 to $1 profit per share in January.
This has been a turnaround from last year when demand remained strong and fares. However, the knock-on effects of inflation and rising fuel costs are starting to affect the airline’s bottom line. With lower fares, Q1 might be weak, but the carrier expects a swift rebound in Q2 and is sticking to its full-year profit forecast for now.
The airline released this statement after trading closed on Monday:
“While all months of 2023 are expected to produce unit revenue significantly above the corresponding months in 2019, the Company is observing new seasonal demand patterns, with lower-demand months such as January and February 2023 growing less than higher-demand months.”
A return to traditional booking patterns
Further forecasting from multiple North American airlines has shown that travelers are reverting to more traditional travel patterns, such as booking and traveling closer to the holidays. From this, United Airlines expects Q2 to improve as we head through the Easter travel period.
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Fuel costs increasing
As reported by Reuters, the airline expects overall fuel costs to increase between 4-7% more than previously estimated for this year, with non-fuel expenses rising by 1%.
When comparing seat miles to total revenue, it is estimated to be up 22-23% in this year’s first quarter compared to last year. This is slower than the growth of 25% the airline previously estimated. As noted earlier in the article, United Airlines expects improved operational figures in the next quarter, which may help offset a challenging first three months of the year.
On another front, the airline revealed its plans to develop sustainable aviation fuel (SAF) from algae. By investing $5 million in the algae biofuel producer, Viridos, the carrier aims to unlock algae’s exciting potential in SAF production.
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Weakened demand, but not to Hong Kong
With China and Hong Kong relaxing restrictions for travelers earlier this year, the airline’s planned San Francisco International Airport (SFO) to Hong Kong International Airport (HKG) is proving popular based on booking trends. The return of UA877 is scheduled for later this month.
Looking at statistics, 47% of travelers onboard are usually connecting passengers, with 4% connecting onwards in Hong Kong, versus 43% continuing from San Francisco. The Californian stopover has provided vital connections to popular destinations, in order ranked below:
- Los Angeles
- Las Vegas
- Portland
- Denver
- San Diego
- Seattle
- Houston
- Mexico City
- Salt Lake City
- Toronto.
This route has been highly profitable for United and has been operating for a few years. According to figures from the United States Department of Transportation, United flew 221,423 roundtrip passengers between Hong Kong and San Francisco in 2019. That was just before the pandemic struck.
Eurowings Discover partners with United Airlines.
The US Department of Transportation (DOT) recently approved a codeshare agreement on February 22nd between United and german airline Eurowings Discover. The deal went into effect on March 8th. The United Airlines code will be available on all Eurowings Discover flights from and to North America, consisting of Tampa Bay, Fort Myers, Orlando, Salk Lake City, Las Vegas, Philadelphia, and Anchorage.
